Table of Contents. Acknowledgements. Introduction 1

Transcription

1 Table of Contents Acknowledgements Introduction 1 Chapter 1: An Information Gap The Role of the Finance Department Profitability Value Stability The Organizational Structure of the Finance Department Growing Complexities Segregation of Knowledge and Decision Making Financial Reporting and Accrual Accounting Widget Guy: Accrual Accounting in Action The Role of Earnings in Finance Earnings and Profitability Earnings and Value Earnings and Stability Actual Cash Flow as a Solution 32 Conclusion 34 Chapter 2: The Mechanics of Actual Cash Flow Cash Flow: What Are We Trying to Measure? Operating Outflows Operating Inflows The Capital Base Interest, Dividends, and Economic Income Cash Flow Analysis 45 ix

2 Operational Uses of Cash Analysis Strategic Uses of Cash Analysis An Introduction to Actual Cash Flow 49 Conclusion 50 Chapter 3: Why Actual Cash Flow? The Financial Statement Presentation Project The Statement of Cash Flows Operating Cash Flow Investing Cash Flow Financing with Assets An Inefficient Management Tool Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) Depreciation and Amortization Taxes EBITDA and Accrual Accounting An Inefficient Management Tool Free Cash Flow As a Cash Flow Measure Free Cash Flow and Accrual Accounting An Inefficient Management Tool 89 Conclusion 89 Chapter 4: Where the Cash Is The Cash Flow Structure Cash Reconciliation Off-Balance Sheet Cash Mapping the Cash Flow Bank Account Flow Charts Cash Activity and Firm Operations Cash Data and the Funds Flow Cycle The Cash Flow Report The Basic Report 101 x

3 Daily Cash Reporting Report Functionality Cash Analysis and Ratio Trends Net Operating Cash Received (NOCR) Cash Ratios 113 Conclusion 117 Chapter 5: Assets and Cash Flow Securitization Financing The Common Structure of Securitizations Sample Configuration Alternate Securitization Forms Securitization and the Funds Flow Cycle Securitization and Actual Cash Flow Securitizations and Financial Reporting Pension Plans Pension Basics Pensions and the Funds Flow Cycle Pensions and Actual Cash Flow Pension Cash Flow and Pension Accounting Mergers and Acquisitions Cash Flow and Valuation Changes in the Capital Base Synergies and Return Other Assets 157 Conclusion 158 Chapter 6: Liabilities, Equity, and Cash Flow Procurement and Accounts Payable The Cash Flow Information Matrix Procure to Pay Technology and the Bank Account Structure The Equity Method Understanding the Investment 167 xi

4 Understanding the Liability: Affiliate Investments and Actual Cash Flow Financial Risk Management and Hedging The Basics of Risk Hedging and the Funds Flow Cycle Derivatives and Actual Cash Flow Hedge Accounting Employee Stock Options The Basics of Employee Stock Options Employee Stock Options and the Funds Flow Cycle Employee Stock Options and Actual Cash Flow Employee Stock Options and Accounting Leasing The Basics of Leasing Leasing and the Funds Flow Cycle Leasing and Actual Cash Flow Leasing and Accounting The Capital Base Clarity on the Capital Base Analysis and the Capital Base Cash Equity Reviewed 204 Conclusion 206 Chapter 7: Multinational Aspects Foreign Currency Exposure Transaction Exposure Translation Exposure Reporting Multicurrency Actual Cash Flow Cash Flow versus Cash Positions Local Capital Structures Understanding the Global Actual Cash Flow Combining Foreign Subsidiary Cash Flow into the Parent s Report Dissecting Dependencies between Subsidiaries of a Multinational 228 xii

5 Translation Risk for the Combined Firm Translation within Financial Reporting 233 Conclusion 234 Chapter 8: Cash Forecasting Cash Forecasting within Actual Cash Flow Extended Cash Reconcilement Reviewing the Existing Knowledge Long-Term Cash Forecasting Forecasting the Operating Funds Flow Cycle Forecasting the Capital Base and the Costs of Capital Short-Term Cash Forecasting Specific Predictions Simple Moving Averages Testing and Using the Cash Forecasts 257 Conclusion 259 Summing Up 261 xiii